What is Market-Based Management?  What are its ten guiding principles? AHI co-founder Robert Paquette found out as an invited guest of Koch Industries to the Third Annual Market-Based Management University at Koch headquarters in Wichita, Kansas.  During the three-day conference (July 20-22), attendees exchanged views on economics, law, business, and political theory with a range of Koch executives, including Charles Koch.  In several sessions, discussion centered on writings by Michael Polanyi and Friedrich Hayek and how in the absence of sufficient knowledge spontaneous orders develop in scientific as well as economic communities, as the most efficient way to solve problems of value creation.

As Hayek, citing Alfred Whitehead, pointed out, civilization advances less by conscious planning than by a dynamic of nature, custom, and deliberation, “by extending the number of important operations we can perform without thinking about them.”  Rationalist stipulation or calculation bred of hubris invariably runs against the  problem of inadequate knowledge in an ever changing world and encourages imposed inefficiency as well as government by top-down command.  Allowing individuals a personal sphere of freedom based on property rights–the accountability that comes with ownership,  internalizing externalities–not only fosters the development of spontaneous orders that more efficiently allocate resources, but provides for a more just and moral order as well, where persons have precepted relations that more clearly define responsibilities and obligations, whether contractual or organizational, to others.  Koch Industries understanding of a kind of entrepreneurship with humility investigates the market-based, co-ordinating conventions and symbols that need to be habituated to enhance efficiency without sacrificing the creative freedom needed for organizational vitality over the long haul.  Market-based “traditions” do not sacrifice orginality but promote it.

“The MBM conference provided me with a more stimulating discussion of business in three days, than I have heard in the academy in three years,” said Paquette.  “I am grateful to Charles Koch and his team, who were exemplary hosts.  The sessions contained lively discussions and debate, creating as a result  among the attendants spontaneous orders of their own that may turn into lasting friendships and partnerships.”